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NEW QUESTION: 1
Tennis rackets and tennis balls are:
A. Substitute goods.
B. Inferior goods.
C. Independent goods.
D. Complementary goods.
Answer: D
Explanation:
Choice "d" is correct. Complementary goods are ones whose demand fluctuates together. If Good A and
Good B are complements, then if the demand for Good A increases, the demand for Good B will also
increase, tennis rackets and tennis balls are complements. Choice "a" is incorrect. For substitutive goods,
as the price of one of the goods increases, the other good experiences an increase in demand as it is
substituted for the first good. An example of substitute goods is apple and orange juice. Choice "b" is
incorrect. Independent goods have demand functions that are not interrelated. An example would be
bread and vacuum cleaners. Choice "c" is incorrect. Inferior goods experience a decrease in demand
when income levels rise. An example is hamburger, which experiences decrease in demand as incomes
rise and buyers switch to higher priced meats.
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D. Lower the capital adequacy requirements for banks
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